Source: U.S. Food Marketing System, 2002, ERS-USDA EconS 451: Lecture #4 U.S. Food Retail Be able to differentiate between different types of Food Retail outlets: Supermarket, Convenience Store, Superette, Supercenter, Warehouse Club. Understand U.S. Food Retail sales trend and where growth has occurred. Be able to explain what has happened to the number of Supermarkets in the U.S. relative to the amount of Supermarket floor space and the number of unique items per store. Explain where concentration in this industry is occurring and whether consumers should be worried. What have been the challenges to “On-Line Shopping” Where has the U.S. Food Retail industry focused improving productivity while lowering operational costs? Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Source: U.S. Food Marketing System, 2002, ERS-USDA Retail Definitions Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Distribution of U.S. Foodstore sales Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Source: U.S. Food Marketing System, 2002, ERS-USDA

Source: U.S. Food Marketing System, 2002, ERS-USDA

Number of Supermarkets and Sales Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Supermarket Definitions: Source: U.S. Food Marketing System, 2002, ERS-USDA

Source: U.S. Food Marketing System, 2002, ERS-USDA Loss of Market Share Conventional supermarkets have lost significant market share to Supercenters and Warehouse clubs. Their strategy to compete is to: Focus on natural foods More pre-prepared foods Promote store/private labels Promote frequent shopper discounts On-line home shopping Self-Checkout More personalized Source: U.S. Food Marketing System, 2002, ERS-USDA

Challenges to On-Line Shopping Meeting customers expectation on timely delivery Access to delivery locale in all weather conditions Spoilage for perishables like milk, ice cream, damaged fruit, etc. Inflated delivery costs in low/density areas. Primary reasons why success has been in high-density cities. Source: U.S. Food Marketing System, 2002, ERS-USDA

Retail Mergers / Divestures Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Concentration in Food Retail National Concentration has increased substantially, local market concentration has only increased slightly due to anti-trust oversight and monitoring. Between 1992-1998 C4 ratio of national grocery retailers increased 68.6% while the C4 ratio among the largest 100 cities increased 5.4%. Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Sales of Top Grocery Wholesalers Source: U.S. Food Marketing System, 2002, ERS-USDA Food Retail World - Leading Retailers Source: U.S. Food Marketing System, 2002, ERS-USDA

Productivity and Average Hourly Earnings Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Foreign Owned Food Retailers Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA

Source: U.S. Food Marketing System, 2002, ERS-USDA Summary! Retail food sales growth has been slow due to slow population growth and growth of fast-food sales. The number of supermarkets has declined while average floor space has increased, understand the benefits associated with this market shift. Nontraditional supermarkets have focused on all natural specialty products (Wild Oats, Whole Foods, Trader Joes). Implications for industry concentration related to upstream purchasing power relative to ability to increase price to consumers. Understand food retail employment productivity changes relative to average earnings per employee. Foreign investment in U.S. Food Retail still relatively small, but investment of U.S. Food Retail from abroad is growing. Source: U.S. Food Marketing System, 2002, ERS-USDA Source: U.S. Food Marketing System, 2002, ERS-USDA